STAT 473 S21 Quiz Chapter 09 Solutions.pdf - STAT 473...

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STAT 473 Spring 2021 Chapter 9 Quiz – It’s Not Easy Being Green 2. Kermit own’s an American style call option on the Sesame Street Gym Equipment Company (SSG) with a strike price of 64 that expires 6 months from today. SSG will pay a dividend of X in 4 months. You are also given the annual continuously compounded risk-free rate of interest is 10%. a. (4 points) Compute the smallest amount of X that would make it such that, as of today, Kermit would consider the early exercise of his option to be RATIONAL.
Dan Rubin March 17, 2021 b. (2 points) If X > 0, what is the earliest date that Kermit would consider early exercise of his option to

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